January 1, 2010

A Little Financial Organization

The New Year is upon us and for me that means cleaning out and starting a new financial filing system. I have been reading a lot of sites and blogs that are saying to think about ways of saving money in the new year, or living more frugally. I thought that today I would take a slightly different route and share with you what I feel are good things to be done to keep a decent record of all your financial doings over a year. I don't think any of these will actually save you any money. They might, since you could use it to easily see what you have been spending and change your habits accordingly. But if nothing else it will seriously save you a headache if you get into a jam - such as (heaven forbid) an audit, or you need proof of paying a bill - and you have your documents readily available.

Note: I am NOT a professional. While I have spent the last 5 years as an unofficial bookkeeper this should by no means be taken as legal financial advice. This is just my own personal system that I use and want to share. Please use as you see fit.

Start by picking one place to keep all your current documents. "Current" meaning everything for the current year (2010 in this case) from January to December. For us, it is a file drawer in our desk in the office. Keep a separate location that you can store past years in. We have a small rolling file cabinet in our bedroom closet. Or you can just box up previous years in well labeled bankers boxes and store them somewhere. If you're paranoid, you can find storage facilities for such files. Up to you.

Go buy a package of file folders. Whether you store your files in a file drawer or a box or anywhere else, this will help keep things separated and easy to find. On each tab write the name of one payee or category. For example "Progressive Insurance" or "Car insurance", "PG&E", "Cell Phones", etc. Be sure to make a file for everything that you will have paperwork for on a regular basis such as doctors and house repairs and credit cards. If you will wind up having a few random receipts or bills for different places make a "Misc." file. Put all these files together as a "Payables" section. I use a hanging file holder for each section.

Next make a section for "Banking". Write "Bank Statements" at the top of a folder (or if you have a few different accounts use bank names, account names, or account numbers), with the year, and place that in this section. I also keep separately labeled envelopes for deposits, withdrawals, car loan payment receipts, and paycheck stubs. I think the paycheck stubs is the most important because if you want to get a loan for anything or rent an apartment or have anything else you need financial proof for, then you can find them easily.

When you pay a bill write on the first page the date you paid it, the amount, and either the check number or online/phone confirmation number. This way, if you ever get harassed about not paying a bill you can say "No, I payed it on such and such with check #blah" and go from there. Once that's done, place it in the appropriate file.

Find one place to keep all your bills. Anything that has paperwork, whether it be mail or a print out, gets pinned to the bulletin board above our desk for easy finding. You could use a file folder, a tray, or even a certain spot on a shelf. Just keep them all together so you don't have to worry about a missed bill.

Pick a time to pay bills. This can be once a week, or once a month. Just make sure it is consistent so that you don't forget and wind up missing a due date. I have a large year-view calendar that I write all our due dates on (1st is house, 9th is car, 15th is PG&E, etc). Then on the weekend Ben and I sit down to see what is due in the next week or two and what/when/how much to pay.

Keep a check register. You can either do this with the register that comes with your checkbook, a purchased book from just about any office supply store, a spreadsheet, or even a piece of paper with lines drawn on it. I use Quicken financial software that does all the work for me as long as I put in the information it wants. I like using it for the ease of getting reports about how much we're spending on what. Keeping a current register will help you avoid spending more than you have and keep you from being charged overdraft fees (which saves you money - hey I did find something!).

Do your bank reconciliations as you get your statements. This will allow you to find out if you have any discrepancies that need to be dealt with. Usually statements come with a little reconciliation slip you can use, or you can do them by hand. If you have software like mentioned above, you can use that. If you've never done this before, now is a good time learn.

There! Easy as pie. Now all you have to do is make sure you file things in the correct folders/places through out the year and you're good to go. Once the year is done, just take your files out of the "current" keeping space and put them away elsewhere. Start the process over again with fresh folders!


Lilacs 4 Angels said...

Meg, I do mine about like you do although I have a folder marked "Taxes" in which, through the year, anything that I will need for filing my taxes is put into...medical payments, prescriptions that I pay out of pocket for, dmv statement as part is deductible; just anything that I think I may need.

Meg said...

Ah, thank you for reminding me to do that! I used to do that before Ben and I got married and then never seemed to do it again since then. Now that we have a house I really need to do that to keep track of things we can deduct.

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